28/05/2020
NEWS STORY
As McLaren Group's revenue crashes by 61.5%, filings reveal that last year saw the company pay the final instalment of Ron Dennis' £275m pay off.
Dennis, who took control of the Woking team in the early 80s and went on to turn it into the sport's second most successful team - certainly in terms of drivers' titles and race victories - as well as a leading manufacturer of super cars, parted company with McLaren in mid-2017.
Company filings reveal that Dennis was paid $242m (£200m) in 2017 and was also due to receive "further deferred consideration of £75m ($91m) payable in December 2017 and August 2019".
As previously reported, McLaren secured the first $45.5m (£37.5m) payment on a number of its most historic cars which meant that Dennis would have been entitled to them if he did not receive the money.
According to Forbes, in order to finance the transaction, McLaren issued a sterling bond of $450m (£370m) and a $250m dollar bond traded on the international stock exchange, the proceeds of which were used to settle transaction fees, refinance debt, repay shareholder loans and acquire Dennis' 25% stake in McLaren.
Consequently, McLaren is now controlled by Bahrain's Mumtalakat sovereign wealth fund, which holds a 57.7% stake, with 14.7% owned by the Saudi TAG Group, 10% owned by Michael Latifi and the remainder held by minority investors.
"On the first of June 2017, I sold all of my shareholdings in all of my companies and changed direction," Dennis told Sky News recently. "My world is now philanthropic, I'm doing different things for different reasons. And I won't criticise anybody."
Indeed, one of his initiatives was to donate $1.2m (£1m) to fund meals for NHS workers who had been dealing with coronavirus patients.
In common with other car manufacturers, McLaren has been hit hard by the coronavirus pandemic, and as a result it shareholders recently injected a much-needed $360m (£300m) into the business.
In the first three months of 2019 McLaren sold 953 cars but in the same period this year sales were down to just 307. This has led to McLaren's revenue reversing by 61.5% to $136.2m (£109.4m) whilst pre-tax loss were up from $22.9m (£18.4m) in the first quarter of 2019 to $165.6m (£133m) over the same period this year.
The ongoing shutdown means that the second quarter is not going to look any better, a situation not helped by the fact that the company will need to pay the manufacturing costs of the cars built in the first quarter, as, like many, it pays suppliers 60 days after the end of the month that they submitted their invoice.
Despite the company's greatly reduced revenue, the costs still need to be met, which explains why it will face "an unexpected need for liquidity which will impact the Group around the middle of the year.
"Working capital funding is being sought to support the Group's liquidity requirements with discussions with third parties ongoing," state the filings. "McLaren Group is currently looking at a number of potential financing alternatives, secured and unsecured, of up to £275m ($333m) equivalent to strengthen its liquidity position. Covenant waivers are also currently being discussed with our banking group."
It adds that $37.3m (£30m) of annual savings have been "found from other overheads including sales and marketing, events, motorsport, travel, racing costs, IT and facilities management".
Having furloughed a large percentage of its workforce, the company announced this week that it expects to make around 1,200 redundancies to help it through the downturn and comply with the impending F1 budget cap.
It claims that these measures will net around $56m (£45m) of savings this year though admits that this is "a fluid situation".
McLaren says that it "is currently planning to bring the racing team back from furlough in June to be ready for the first race", which is set to take place in Austria in early July. More than most, the Woking outfit will be keen to see the 20200 season finally get the green light.
In the first quarter of this year, the F1 team had revenue of $38.2m (£30.7m), down just 12.3% on the same period in 2019.
Interestingly, McLaren says it "expects that the net cost of racing in 2020 will be no worse than 2019 if the season does start in July 2020".
However, its automotive division is looking to produce just 1,500 cars this year, down 67.8% on 2019.